Pfizer buys Allergan for $160bn in record-breaking M&A deal

January 2016 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

January 2016 Issue

Biopharmaceutical giant Pfizer Inc. has announced that it is to acquire speciality pharmaceutical company Allergan plc in a transaction believed to be the largest in healthcare history, creating a new global leader in biopharma business and innovation.

Under the terms of the definitive merger agreement, Pfizer will combine with Allergan in a stock transaction currently valued at $363.63 per Allergan share, for a total enterprise value of approximately $160bn, based on the closing price of Pfizer common stock of $32.18.

Allergan shareholders will receive 11.3 shares of the combined company for each of their Allergan shares, and Pfizer stockholders will receive one share of the combined company for each of their Pfizer shares. Pfizer stockholders will have the opportunity to elect to receive cash instead of stock of the combined company for some or all of their Pfizer shares, provided that the aggregate amount of cash to be paid in the merger will not be less than $6bn or greater than $12bn.

“The proposed combination of Pfizer and Allergan will create a leading global pharmaceutical company with the strength to research, discover and deliver more medicines and therapies to more people around the world,” said Ian Read, chairman and chief executive of Pfizer. “Allergan’s businesses align with and enhance Pfizer’s businesses, creating best-in-class, sustainable, innovative and established businesses that are poised for growth. Through this combination, Pfizer will have greater financial flexibility that will facilitate our continued discovery and development of new innovative medicines for patients, direct return of capital to shareholders, and continued investment in the United States.”

Pursuant to the terms of the merger agreement, the Allergan parent company will be the parent company of the combined group. A wholly owned subsidiary of Allergan will be merged with and into Pfizer and, subject to receipt of shareholder approval, the Allergan parent company will be renamed ‘Pfizer plc’ after the closing of the transaction. This means that the combined company will maintain Allergan’s Irish legal domicile – a move which has seen the US-based Pfizer accused of corporate tax avoidance (i.e., tax inversion) by president Obama, among others.

The new entity’s board is expected to consist of 15 directors and will be led by Mr Read (continuing his previous role) and Brent Saunders (currently Allergan’s chief executive) as president and chief operating officer.

“The combination of Allergan and Pfizer is a highly strategic, value-enhancing transaction that brings together two biopharma powerhouses to change lives for the better,” said Mr Saunders. “This bold action is the next chapter in the successful transformation of Allergan allowing us to operate with greater resources at a much bigger scale.”

As a result of the combination with Allergan and subsequent integration of the two companies, Pfizer expects to make a decision about a potential separation of the combined company’s innovative and established businesses no later than the end of 2018.

Subject to certain conditions (including receipt of regulatory approval in certain jurisdictions, including the US and EU and the receipt of necessary approvals from Pfizer and Allergan shareholders), the transaction is expected to be completed in the second half of 2016.